The California Fair Pay Act: Make Sure You’re Up to Speed on SB 1063 and AB 1676

For more than 60 years, California’s Labor Code required that and men and women be paid equally for equal work. In 2015, Governor Brown signed the California Fair Pay Act, which expanded this law to require not only equal pay for equal work, but equal pay for “substantially similar work.” However, the term “substantially similar” has yet to be clearly defined by the courts or the legislature.

Potentially adding to the confusion are two new bills, SB 1063 and AB 1676, which went into effect on January 1, 2017. These new laws further expand the California Fair Pay Act by prohibiting pay discrimination based on race, ethnicity, or salary history for substantially similar work.

SB 1063: Wage Differential Based on Race or Ethnicity

SB 1063, the Wage Equality Act of 2016, extends the California Fair Pay Act to cover not only unequal pay based on sex/gender, but also unequal pay based on race and ethnicity. Effective January 1st, California employers are prohibited from paying employees a wage rate less than the rate paid to employees of a different race or ethnicity, for substantially similar work.
Additionally, if a wage differential exists between two employees doing substantially similar work, than an employer must be able to show that specific and reasonably applied factors account for the entire differential. These factors include:

Seniority systems

Merit systems

Systems that measure quality or quantity of production; or,

A “bona fide factor” other than sex, race, or ethnicity such as education, training, or experience.

AB 1676: Wage Discrimination Based On Salary History

AB 1676 is also a new law that took effect on January 1, 2017, which further amends the California Fair Pay Act. The bill aims to prevent employers form using prior salary as the sole justification any disparity in compensation. Specifically, the bill states that prior salary, by itself, does not qualify as one of the “bona fide factors” mentioned above.

It is important to note that AB 1676 does not prevent employers from asking applicants for their salary history. Employers may pay new hires a salary based on any “bona fide factors.”

However, they simply cannot use prior salary as a “bona fide factor” to justify disparity in compensation. This is especially true for employees of different sex/gender, race, or ethnicity who do for substantially similar work.

Some Recommended Steps for Avoiding Claims

SB 1063 and AB 1676 carry the same implications as the Fair Pay Act of 2015. For background on the law and some recommended steps for avoiding claims, see the article California Fair Pay Act.